Currently Not Collectible status can provide some breathing room when paying the IRS would leave a taxpayer unable to cover basic living expenses. Once an account is placed in CNC status, the IRS temporarily suspends most active collection efforts. Wage levies and bank levies are generally paused, but the underlying tax debt remains.
So, how long does Currently Not Collectible status last? There is no fixed period that applies to every taxpayer. It may continue for months or years, depending on the person’s finances and any changes in their ability to pay.
Is Currently Not Collectible Status Temporary?
The IRS uses Currently Not Collectible status when it determines that a taxpayer cannot afford to make a payment without experiencing financial hardship. CNC status does not settle, reduce, or forgive the debt. Penalties and interest generally continue to increase while the account remains unpaid.
The IRS may also file a Notice of Federal Tax Lien or leave an existing lien in place. CNC status can continue as long as the taxpayer’s financial condition supports it, but the IRS may review the account later. The purpose of the review is to determine if the person’s ability to pay has improved.
This does not mean that the IRS will contact every taxpayer on a set date. Some accounts remain in CNC status for a long time, while others return to active collection after a change in income or financial circumstances. The length of time will depend on the facts of each case.
What Can Cause the IRS to Review CNC Status?
When placing an account in CNC status, the IRS may establish a follow-up income level based on the taxpayer’s expected future earnings. Information reported on a later tax return may show that income has reached that level. This can lead the IRS to review the account again.
Other financial changes may also lead to a review, including:
- An increase in wages or business income
- Starting a new job
- A meaningful reduction in living expenses
- The sale of property
- Receipt of an inheritance
- New information about assets
- A missing required tax return
- A new unpaid tax balance
- Financial information reported on a later return
An improvement in finances does not always mean the IRS will demand full payment. The agency may first review the taxpayer’s updated income, living expenses, assets, and debts. That review could show that the taxpayer still cannot afford a payment or that a small monthly payment is now possible.
What Happens During a CNC Financial Review?
If the IRS reviews the account, it may request an updated Collection Information Statement. Individuals may be asked to complete Form 433-A or Form 433-F. Businesses may need to provide Form 433-B.
The IRS may also request supporting records such as:
- Recent pay stubs
- Bank statements
- Housing expenses
- Utility bills
- Medical expenses
- Vehicle information
- Retirement account balances
- Business financial statements
- Information about real estate and other assets
These records help the IRS compare the taxpayer’s monthly income with allowable living expenses. The IRS uses national and local financial standards when reviewing many household costs. Some actual expenses may be accepted when they are necessary for the health and welfare of the family or for the taxpayer’s ability to earn income.
Other expenses may be limited to the applicable IRS standard. If the updated information still shows that no payment is possible without hardship, CNC status may continue. If the IRS determines that some payment can be made, an installment agreement may become an option, or active collection could resume if no other arrangement is reached.
Does CNC Status Protect Future Tax Refunds?
A taxpayer generally must remain current with required tax filings while in CNC status. If a later tax return shows a refund, the IRS will usually apply it to the outstanding tax debt. Currently Not Collectible status normally does not prevent this type of refund offset.
In limited hardship situations, an Offset Bypass Refund may be available if the request is made and approved before the IRS applies the refund to the debt. This type of relief is not automatic. Timing can also be important because the IRS generally cannot issue an Offset Bypass Refund after the refund has already been applied.
A large refund may suggest that more tax is being withheld from each paycheck than necessary. A careful adjustment to withholding could increase monthly take-home pay, but reducing it too much could create another balance when the next return is filed. New unpaid taxes may place the existing CNC arrangement at risk and make the overall tax problem more difficult to resolve.
Can a Tax Lien Remain During CNC Status?
Currently Not Collectible status pauses most collection activity, but it does not automatically remove a federal tax lien. The IRS may file a Notice of Federal Tax Lien before or after placing an account in CNC status. A lien protects the government’s interest in the taxpayer’s property while the debt remains unpaid.
The existence of a lien does not necessarily mean a levy is about to occur. A lien is the government’s legal claim against property, while a levy is the actual taking of property or money. Even when active levies are paused, the lien may remain until the debt is paid, becomes legally unenforceable, or qualifies for another form of lien relief.
Can the Collection Deadline Expire During CNC Status?
The IRS generally has ten years from the date a tax is assessed to collect it. The end of this period is known as the Collection Statute Expiration Date. Time normally continues to run while an account is in Currently Not Collectible status.
As a result, some tax debts may reach the end of the collection period while the taxpayer remains unable to pay. However, the calculation is not always as simple as counting ten years from the tax return’s due date. The collection period normally begins on the assessment date, which may be later than the filing deadline.
Certain events can also suspend or extend the collection period. These may include:
- Bankruptcy
- An Offer in Compromise
- Certain installment agreement requests
- Some IRS appeals
- Tax Court proceedings
- Time spent living outside the United States under certain circumstances
Each tax period can have a different assessment date and history. Separate balances may therefore have different collection expiration dates. Reviewing an IRS account transcript may help clarify when each tax was assessed and if the collection period was suspended.
What If the Taxpayer’s Financial Situation Improves?
An improvement in income does not necessarily mean that the entire balance becomes due at once. The IRS may review the taxpayer’s current finances and determine that a monthly installment payment is now affordable. In other situations, an Offer in Compromise or another resolution could provide a more suitable long-term result.
The available options depend on the taxpayer’s income, necessary expenses, available assets, remaining collection period, and total amount owed. A person who has remained compliant with current filing and payment requirements may also be in a better position to consider another resolution. The appropriate option will depend on how the financial circumstances have changed.
Final Thoughts
Currently Not Collectible status can last for several months or continue for years. Its duration depends mainly on the taxpayer’s ability to pay and any financial changes that come to the IRS’s attention. There is no single expiration date that applies to every CNC arrangement.
During that time, the tax debt remains. Penalties and interest generally continue, future refunds may be applied to the balance, and a federal tax lien may remain in place. The IRS collection period may also continue to run.
Remaining current with required tax filings and avoiding new balances can help prevent additional complications. Financial records may also become useful if the IRS reviews the account later. These records can help show if paying the tax would still create a financial hardship.
At the Law Office of Steven N. Klitzner, we help taxpayers apply for and maintain Currently Not Collectible status. We can also review other resolution options if your income has changed or the IRS is preparing to resume collection. Contact us to discuss your tax debt and current financial circumstances.
This article is provided for informational purposes only and does not constitute legal or tax advice. Reading this article does not create an attorney-client relationship. Every tax matter is different, and you should speak with a qualified tax professional about your specific circumstances.
Steven N. Klitzner, P.A. is a tax attorney based in Miami, Florida. He has been practicing tax law for over 40 years, and currently holds a 10.0 rating by Avvo. Mr. Klitzner was appointed to the IRS Service Advisory Council in 2021 and is... 
